Outdoor Dining Breakdown, PPP Roundup, DOH Inspections….
IT’S WAR!!!!! LANDYS FIRE OFF TERMINATION NOTICES, TENANTS HIT BACK WITH 1932A
Landy’s are just so spoiled and used to getting their way. They bully and frighten and posture and sue and send intimidating notices. They don’t scare us anymore though because we have little left to lose. In the past, when we were operating profitable restaurants, we played along because that was part of the deal and we were making money and Landy was just another colorful character in our world of hospitality.
But now, now, with our backs against the wall, Landy is seeing our pugnacious side and our resilience. They send termination notices, we make masks out of them. They bully and threaten, we 1932A their asses and threaten back that we will walk. It’s war now and little lord Landyboy is finding out what hospitality people are made of and it ain’t all sugar and spice. We are the toughest business owners in town and now, Landy, you are going to start feeling the pain.
Put on your little green visor and sit at your garage sale desk, pull the lever on your adding machine and you know what you are gonna find on that bottom line Landy? A lot less rent money in the bank and many more vacant spaces. And then Landy, the pressure is going to build as you start defaulting on your bank obligations and have to scrounge for funds. It didn’t have to be this way but you are greedy and had to be the boss and now, you too will go down. Hard.
Never again will restaurant people deal with asshole Landy. We have had enough. If you are not a good person and you give us a hard time in lease negotiations or we don’t like you when we meet you, we are out and will find another space. You better wake up Landy and change your ways and become a part of the community rather than a pariah or your future will be bleak and you will become extinct.
Joey Regs Says: PPP Forgiveness
At this point we all know what the PPP loan program is, how it works, and what it’s supposed to do. There’s no sense in rehashing that here. We will, however, be posting a new, updated list of Top Ten FAQs below though, for those that are curious. And It’s also worth noting that the deadline was extended again for filing brand new PPP applications. The deadline had been June 30th, but is now August 8th. So, if you haven’t applied yet, you may wanna get on that. Congress knows that they need to roll up their collective sleeves and figure out a meaningful second stimulus package for all of us, but they’re nowhere at the moment. So, I guess the thought process was “let’s extend part of our first half-assed attempt at a stimulus package for an extra 5 weeks, to hold people over?” Cool.
The fact remains, that the burden of getting the PPP loan program to actually work for you (which is what we all need, frankly), is on you. And IT’S ALL ABOUT THE FORGIVENESS APPLICATION.
As you all have come to know us, you’ve seen that we’ve been consistently putting ourselves in position to provide you meaningfully assistance at every turn of this pandemic nightmare-specifically as it relates to navigating the government’s poorly conceived and even more poorly executed PPP loan program. And we’re not going to stop until the job is done.
The PPP Loan program can be divided into three different and distinct sections:
1) The loan application process;
2) Strategy, number-crunching, labor/employment advice; AND
3) The forgiveness application.
Section 1 was all about the data: pulling payroll numbers, pulling rent/utilities numbers, pulling corporate info, and shoving it all into an easy-fill bank form. Was completing this application rocket science? No. Could you still screw it up though and ruin your chances of getting the right amount or even render yourself totally ineligible by applying incorrectly? Absolutely. So, we got up to speed quickly, and offered to help. Many people took us up on that offer, and we’re happy to say that we had a 100% success rate with the PPP loan applications that we processed, and there were over 100 of them.
Section 2 was all about figuring out how to spend the money, on what, and trying to back into 100% forgiveness. For most hospitality people this was borderline impossible, given the climate. What made matters worse was that the SBA would constantly change the rules and would not give answers to the hard, threshold questions that were most important for planning purposes. The gross majority of operators in our industry chose to either go it alone for the loan application, have their banker help with the application, or rely on their accountants to do so. There was obviously nothing wrong with that approach at all, but in section 2 here, you got into some heavy labor and employment law strategizing, and for that, people needed some legal counsel too. So, we jumped in again here, and our P5 program was born: providing post-funding counseling and advice for PPP loan recipients. This program proved to be just as popular as the initial PPP program, and our whole team has been engaged with people on the phone and via email, round the clock for months now.
Section 3 is about getting 100% forgiveness – or as close to that as possible. Many of us can’t afford to have this loan stay a loan; if it’s not at least mostly forgiven, we’ll be in trouble or maybe even out of business completely. Could you have done the PPP loan application yourself? Yes. Given the totality of the changes to the PPP guidance (FTE issue out the window, 24 weeks instead of eight, safe harbor, 60-40 i/o 75-25, etc.), could you have navigated the strategy and planning portion of this process without our extra hand-holding? Yes. Can you prepare and file the forgiveness application yourself? We wouldn’t recommend it. You get one shot at this, and it’s for all the marbles. We’re not even doing this alone! As we have indicated before, we’ve partnered up with the accounting firm of Scotto & Melchiorre to assist. Their CPAs and SBA professionals will be key here. And when you hire us for ANY of these PPP packages, you automatically get them as well.
So, for those of you who have chosen to go it alone for sections 1 and 2, but are now looking for help with JUST the forgiveness application, we’ve got you covered. We are now providing that service. If you are interested, please email Loanhelp@HelbraunLevey.com or call us at (212) 219-1193 today.
*Anyone who has engaged us for our initial PPP package or our P5 package, you are already getting this service.
- How do I apply for forgiveness?
Through your lender, by submitting either the standard Form 3508 or the Form 3508EZ. Each bank will have its own forgiveness application process, just as it did for the initial application process, so you should keep an eye out for any communications or related notifications from your bank. We anticipate seeing banks open up their forgiveness application process towards the end of July (although Chase has already indicated that they may not actually be able to get this done until August).
- What’s the difference between the two forgiveness applications?
The EZ form eliminates the requirement of submitting extensive documentation (and calculations) to your bank. If you use the EZ form, you’d only be required to provide summarized totals for the amounts spent on the permitted purposes, as opposed to submitting detailed documentation and calculations verifying your use of PPP loan proceeds.
- How do I know if I can use the EZ application?
You’ll need to be able to certify, under penalty of fraud, that your circumstances satisfy one of the following:
- You are self-employed and have no employees; or
- You did not reduce salaries or hourly wages by more than 25% during the Covered Period AND you did not reduce your FTE levels between January 1, 2020 and the end of the Covered Period; OR
- You did not reduce salaries or hourly wages by more than 25% during the Covered Period AND you were unable to operate during the Covered Period at the same level of business activity as you were before the crisis because of federal COVID-related health/safety regulations.
- How do I verify that I was unable to operate at the same level of business during my Covered Period due to federal regulations?
Because the Treasury Department has now explicitly acknowledged that a significant amount of reduction in business activity stemmed from state and local government shutdown orders that were based on federal guidance, the mere existence of the PAUSE Order and all current/pending NYS re-opening limitations will be sufficient to meet this threshold.
Otherwise, in order to make that certification on your forgiveness application, just take a look at your financials and triple check that you’ve seen an drop in revenue during your Covered Period. Rolling your eyes? We get it, but these certifications are no joke – and it’s our job to make sure you answer them truthfully.
- When can I apply for forgiveness?
According to the SBA, you may submit a loan forgiveness application any time on or before the maturity date of your loan–including before the end of your Covered Period—if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. If, however, you have reduced salaries/wages of employees by more than the 25% as permitted under the PPP, you MAY have to apply that reduction for the entire duration of the your Covered Period, not as of the date they apply for forgiveness.
Of course, this begs the question: how are salary thresholds being measured? Per week? For any week employed during the Covered Period? For 24 weeks-worth? This is unfortunately not entirely clear yet.
- What if I want to apply now, but my bank hasn’t opened the application?
The SBA has not answered this question officially yet, despite the glaring need for this answer. We’ve been advising clients to send their bank contact an email, letting them know of their intention and ability to apply, just to have the record. This is particularly important for those that need to apply early to qualify for full loan forgiveness – but we’d recommend formally putting in writing that you have spent all PPP loan proceeds and would have been able to apply on a specific date certain.
- Have there been any updates or changes made to the limitations on owner compensation?
Unfortunately not. For the 24-week Covered Period, an owner may only be compensated in an amount equal to 2.5 months’ worth of 2019 compensation (capped at $20,833). If you are opting for the 8-week Covered Period, an owner may only be compensated in an amount equal to 8 weeks’ worth of 2019 compensation (capped at $15,385).
Weren’t compensated in 2019? Or weren’t open for all and/or any of 2019? We hate to say it, but the Feds remain silent on the issue, and it looks like you get screwed.
- I received multiple PPP loans across all of my businesses. Each of the applications are being reviewed separately, right?
Yes. As many of you have probably heard us say, we’re of the opinion that each of these applications will still be reviewed in a vacuum. However, the most recent guidance released by the Treasury Department did state explicitly that owner compensation caps are to be applied across all businesses – so while there doesn’t appear to be a mechanism in place to have all “related” applications reviewed together, such that any overlap in owner would throw up a red flag, it’s clear that the SBA cares about owners being paid out of multiple PPP piggy banks. And they have been completely silent about what, if anything, they will do about it.
- What if I got both an EIDL and a PPP?
If you received the EIDL cash advance, these proceeds will be deducted from your PPP forgiveness amount. For example, if you have a $10,000 EIDL grant and a $100,000 PPP loan in which you qualify for 100% forgiveness, then your forgiveness amount will be $90,000, and you will then be required to pay off the remaining $10,000 remaining under the PPP terms.
If you received an EIDL loan, just make sure you aren’t using the loans for a duplicative purpose. In other words, the EIDL shouldn’t be used to supplement the rent payments that you’re making with your PPP or help pay some extra employees during your PPP Covered Period. For now, you should be using it for other operating costs – like paying vendors or purchasing PPE for your employees – and then, once the PPP is behind us (hallelujah!), you can use it on things like payroll, rent, and utilities in the months ahead.
- Can I still apply for a PPP?
Yes. Deadline has now been extended from June 30th to August 8, 2020
Outdoor Dining Update
Guidance from the SLA regarding outdoor dining has now been extended to August 5th.
As if you don’t already have enough stuff to keep up with right now, the City and State seem determined to keep things confusing, whether it’s costly changes to the guidelines for your outdoor dining barriers (see Eater article below) or the hodgepodge of expiration dates for these allowances, it’s just a lot to deal with.
As you all know by now, NYC and the DOT have come up with outdoor dining options by providing temporary permits under the names “Open Restaurants” and “Open Streets.” These outdoor dining options have clear “expiration” dates that at least give businesses a runway for how long they have to work with this model of dining. “Open Restaurants” will currently run until the end of October and “Open Streets” until Labor Day. The SLA and Governor aren’t giving those same dates of expiration, however, and their guidance continues to be issued in 30-day installments only – with no mention of certain extensions. While we do anticipate that the SLA will keep extending these expiration dates, to line up with what the City has issued, we get right down to the wire before finding out for sure.
As a note, if you are temporarily adding outdoor seating to your premise that is not part of the “Open Restaurants” NYC permit, you need to update the SLA of your extension. And if you were one of the countless unlucky operators who got hit by the DOT over the last week, please let us know. We’ve been flooded with complaints about enforcement thus far, and we’re putting together a broad plan of attack.
For more information on the SLA’s outdoor dining guidance, please follow the link below.
*Currently extended to 8/5/2020.
For more information on the SLA’s takeout/delivery guidance, please follow the link below.
*Currently extended to 7/26/2020.
For more information on the DOT’s guidance for curb lane and sidewalk seating, please follow the link below.
Link to Eater article re: DOT rule changes.
HL Reopening Guide, #4 – Cash Flow w/ Jared Lewis
It’s time for the fourth installment of the Helbraun Levey reopening guide. And for this week’s issue, we turn to our friend and colleague, Jared Lewis. Jared has been a recurring guest contributor to these newsletters throughout the shutdown, and has consistently focused on budgeting and planning for people in the hospitality industry. To remind everybody, Jared is a hospitality consultant- and one of the best we’ve worked with, honestly. It’s rare that you find someone with legitimate operations experience, who’s been an owner in NYC, and also has that trusty Ivy League degree and Masters in Finance in their back pocket. There are plenty of smart people out there in the consulting space, but Jared is an operator first, and there’s no substitute for that. Here’s Jared…
I wrote about the importance of cash flow planning a little while ago, but as reopening becomes a real thing, this is a topic that bears repeating. We hope you took the advice to “clean up your books” and are now in a position to easily and accurately gather reports and data to assist in planning for the future.
Rather than just telling you what to do, we wanted to provide you with an easy-to-use planning tool to get the job done. Forget about the fancy words and next-level analysis for a second. What’s most important for every business, at a bare minimum, is to organize your “financial thinking” and have a decent idea of when cash shortfalls will occur.
I teamed up with my good friends at Excel Rainman to create a 13-Week Cash Flow Model that can be downloaded, free of charge, here. Our spreadsheet guru friends at Excel Rainman also created an interactive guide to walk you through the process of cash flow planning, step-by-step. The instructions can be accessed here and we recommend opening this alongside the Cash Flow Model you’ve downloaded until you really get the hang of how to use it.
A few notes before you get started:
- 13-weeks (one quarter) is the business standard for cash-flow planning and is the longest period a pandemic-impacted business should be focusing on at any given time. That said, the intention is for this to be a “rolling plan” so as you approach week 9 or 10 at the latest, you should start planning for the next quarter.
- While cash flow planning is indispensable in the current business environment, it is not a crisis tool alone. If you weren’t doing something similar before the pandemic, you should definitely start ASAP, and continue once you’re out of the weeds.
- Your first stab at this will be messy and likely not that precise, but don’t get discouraged. That is true for any new business, which is what you are now, no matter how long you’ve been around. Forecasting sales and expenses gets easier and more accurate over time, particularly when market variables remain more or less constant. Market variables for the foreseeable future will be neither constant nor predictable, but please stick with it. Financial planning will be valuable no matter what, and will only improve with consistency.
- Do your best to not “massage” the numbers. Hitting a cash shortfall is likely, if not inevitable in the current market. The important thing is to know when it’s coming so you can take early action to find a solution.
- We hope you will find the cash flow model and accompanying instructions easy to use and helpful. If anything is unclear, or you need any additional assistance, feel free to reach out to me directly at the contact info below:
CEO, August Point Advisors
A note about DOH inspections
In response to a large number of employee complaints in the last few weeks, both OSHA and the NYS DOH have separately announced that they will be conducting more in-person safety inspections, particularly in areas (and industries) continuing to experience community spread of COVID-19.
The only way to avoid getting shut down is to actually formalize your health/safety protocols in writing and enforce them in practice. Remember, too, that NYS law now requires you to have a copy of your written safety plan on the premises at all times – this means that even if you can show an inspector you’ve followed the rules otherwise, you’re still on the hook for not having a written policy on file. If you haven’t put pen to paper yet, please PLEASE call us – we can help. We don’t want your hard work and re-opening efforts to go to waste on account of something like this
Webinar Alert: 50 Ways to Leave Your Landlord – Understanding the Risks and Benefits of 1932-A
On May 26, 2020, NYC Mayor Bill de Blasio signed into law Local Law 1932-A, which became effective immediately. The law prohibits the enforcement against individual guarantors of obligations under commercial leases for certain establishments affected by the COVID-19 pandemic with respect to defaults occurring between March 7, 2020 through September 30, 2020.
Great, that means you can just walk away from your lease, right? Not so fast! A misstep now could lead to significant personal liability down the road. Tune into our webinar hosted by our Maya Petrocelli and Joe Taylor, our HL litigation team, to learn the risks and benefits of 1932-A and how to best protect yourself if you are planning to surrender your lease.
Date- July 15th at 2:00
Register here: bit.ly/1932-A
RIP: Ennio Morricone, one of the greatest film composers of all time.
As Jerry and the boys said: “Some folks look for answers, others look for fights”. Well, how much longer are we gonna look for answers? We have been patient but if no help comes soon, we are we gonna have to hit the streets and start fighting.
Have a good night,